How do you think your children would manage money if given the opportunity to earn income, pay expenses, and reap the rewards of a 20% compounding interest rate? My wife and I conducted a 20 week experiment and reviewed our kids decisions using the RoosterMoney app. Are you curious how my kids did and what can be learned from the exercise? I certainly was.
The following is a letter to my children about becoming financially literate using Roostermoney.
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Parent Prologue: After many failed attempts, the RoosterMoney app had everything we needed for this experiment. Our whole family intends to keep using the app until they mature enough to use real money with FamZoo. It’s very kid friendly, interactive and has many customizable options. I’m a big fan. The app is entirely free, but as a member I can offer you and I 3 months of their PLUS features with this RoosterMoney link. Give it a try, it’s well worth it.
Kids RoosterMoney Activity Review Letter
It took a while for me to find a way that would excite you about saving. I wanted to teach you the basics of money coming in, money going out, and interest. The idea was that Mom and Dad would act as the bank and employer. We would pay you for chores, hold your gift money, and give you extra cash as a percentage each month based on how much you saved.
We tried spreadsheets, but you couldn’t see that real time and was difficult to edit your account balance when you wanted that checkout counter fun dip. We tried buying stock you love (Disney & Walmart) to watch it grow, but the daily price changes drove you nuts. We did wall charts, notebooks, popsicle stick chores, and all that nonsense you see other parents doing. None of it worked. After trying several apps, I finally discovered RoosterMoney and you and your sister loved it.
You added your own savings goals and uploaded profile pictures. Reviewed the daily chores needed to earn your allowance and the extra jobs to make even more money. You managed the transfers in your wallet and bank. The initial competition between you both and ever changing profile pictures was fun to watch. Your mom and I can see all your activity, statements, and can add or remove money wherever we are. Made it simple and easy for us all, but how did you do? Did you save what we discussed or did you spend it all?
The Kids Savings Plan
When we started RoosterMoney, I encouraged you to only spend 50% of what you earned and let the rest make free money in the form of interest. With the chores provided and an interest rate of 20%, after 20 weeks you’re account should look like this:
Week 4 – $20.34
Week 8 – $41.02
Week 12 – $62.04
Week 16 – $83.41
Week 20 – $105.13
A free $5.13 by spending half of what you earn and letting the rest invest and compound.
Kids Income – Allowance Money
We set the allowance to just $1 per week, but only included what we need you to do everyday. You must have submitted your completion daily to receive the full allowance at the end of the week. This was to simulate how adults use a time card to get paid for their workday.
Kids Income – Extra Chore Money
These extra chores are a way to earn money as if you own a business or do freelance work. They are optional. You can do as much or as little as you want. My intent was to provide you an incentive and motivate you to earn.
For cleaning your bedroom top to bottom each month you’d receive $1.
Doing a nice deed for your sister would provide $0.25 a day.
If you loaded the washing machine and dryer, we would pay you $0.25 once a week.
Feeding the cats every day earns you $0.25 each time.
If your report card comes back with great results, you’ll have a cool 3 extra dollars.
Loading the dishwasher twice a week gives you an extra dollar.
Putting your own laundry away is $0.30 two times per week.
When fall hits, you could earn 5 dollars for helping Daddy rake the leaves.
Setting the table each night earns you $0.25 daily.
When the blizzards come, Dad will give you 3 dollars to save his back by shoveling the deck.
Kids Expenses – Out Going Money
We wanted you to understand that not only does money come in, but money goes out. You need to support a lifestyle so we setup two routine expenses each week. You’ll need to pay $0.25 as a contribution to the family’s Netflix subscription. You both recently received a budget mobile phone for emergencies and to take with you on sleepovers or various activities when neither Mom or I are around. Your share of the phone cost is $0.50 for a mandatory weekly cost of $0.75… easily covered by your allowance.
If you do all the requirements to earn your allowance and all extra chores, you’ll earn roughly $40 every 4 weeks. That’s a boatload of cash for your age, but would be a great help to the household and an even more valuable lesson about money. If we stick to the 4 week budget plan…$20 should be saved, $3 to cover mandatory expenses, and $17 you can use for toys, candy, and fun. You are a kid after all. How close were you to saving what we discussed?
Kids RoosterMoney Savings Results
This is your total Income vs Expenses in the RoosterMoney app. You can use your math skills to divide the income by 20 to get your weekly results or by 5 for the 4 week plan, but here is the summary for the first 20 weeks.
The first thing I want to say is well done for not spending more than you earned, despite pleas to borrow from Mom and Dad. Borrowing money to get what you want rather than what you need is a lesson I hope you have learned. The bad part is that you are doing what many adults are doing now. It’s called “living paycheck to paycheck.” Money comes in and goes out at the same rate. You have nothing left to save that will make money for you. $1 left in your account is not doing much good. Your sister has over $100 in her RoosterMoney account, so I’ve addressed this letter to you my boy.
Review Your Successes
- You kept expenses lower than income which is critical to staying out of debt.
- You submitted most of your allowance chores showing discipline in getting paid for your time.
- I’m very proud of your great report cards. The effort it takes to be at the top of your class will pay off later. You’ll stop earning grades at some point, but never stop learning.
- Added your extra cash to savings took advantage of the 20% interest allowing your money to make money. This is the critical point of investing.
- You paid your mandatory expenses on time. In the real world, you’d typically have to pay late fees or interest – if your expenses are greater than your income.
Review Your Failures
- Did not earn nearly as much money as you could have. The time it takes to do many of these chores is minimal compared to the money you could make. Laziness will get you no where in life. I don’t know if you hate your sister or what, but doing one nice deed for her a day could have been $35 by now – you only made $4.
- What adults call “discretionary spending” are costs associated with things you want rather than need. I noticed you spent $50 on a Nerf gun your cousin had. Seems like you didn’t want him to have something you didn’t. You were also impatient when you bought a movie on demand rather than waiting for a rental. It’s OK to spend money on this. We do it all the time with sports and family vacations. You just need to make sure it doesn’t get out of control. Don’t try to keep up with those around you or become accustom to instant gratification. In the future, try to maintain the planned savings rate while building excess funds to purchase luxury items.
- We didn’t plan for any “Other” expenses, but you should fear the wrath of your mother when you misbehave. Do something naughty – get warned. Do the same thing again – get 2nd warning. Do it three times and -$0.25. Continue the behavior, and you’re down a dollar in no time. Lesson learned, right? Only happened once.
Maximum Possible Savings
Let me show you how much money you could have if you only covered your 3 dollars every 4 weeks of mandatory expenses, completed all chores, and earned the 20% interest on your remaining balance.
Week 4 – $37.67
Week 8 – $75.87
Week 12 – $114.76
Week 16 – $154.26
Week 20 – $194.48
$9.48 of free money by saving as much as possible and letting the free money build on itself.
If you accomplished this, I would say “Congratulations kido, you are financially independent.” You have enough money saved that the interest generates over your $3 required expenses. You never have to do a chore again. 20 weeks of hard work got you there. You never have to earn another penny to cover your mandatory expenses. This is the concept I’m trying to teach you. Once the money earned from your savings can cover expenses, you no longer have to do anything you don’t want to do to make money. You can choose to do what you want, when you want, while your previous work pays the bills.
Let me make this last point to drive home long term investing. Assuming we had done this for 10 years, didn’t add anymore expenses, and stuck to the maximum savings possible…Mom and Dad would owe you $18,875 and you could still spent most of any gift money on fun stuff. That’s how amazing saving + compound interest + limiting expenses are. At the basic level, the key to being rich is to increase income and decrease expenses. Take this experience with you as you get older and I’ll be very proud.
I can’t recommend RoosterMoney enough for parents with children in the chores and allowance age. Through my membership with RoosterMoney, take a free 3 month test drive of the PLUS version and see if your kids can do better than mine. If your kids are a bit older, I would look into FamZoo and start using real money instead. Please share how you’re educating your kids about money in the comments below.
Here are some additional ideas.
Kylven Ross is the owner and primary contributor of theFIway.com. He has been married for 17 years and is father to a son and daughter living in New England. Professional accomplishments include a bachelor’s degree and industry certifications in the cyber sector. He has spent the last 18 years working in the U.S. Defense Industry and as a Military Police Officer.
He discovered the concept of Financial Independence (FI) during a rather stressful year in the compliance space. After fully absorbing the benefits of FI, he has since committed to turning his household’s finances in the right direction. His experiences are documented as a series of letters that are used to educate his children and others about money. He does not want the next generation to make the same mistakes, but rather achieve financial freedom and find happiness.